The Global Credit Card Industry
A credit card is a payment card issued by a financial company. It gives the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing.
Sales through leading credit cards across the world are worth over US$ 7.5tn. Visa and MasterCard together hold the dominant share of over 85% of global card purchase transactions; players such as UnionPay, American Express, JCB and Diners hold the remainder.
As credit card loans are more profitable business for banks than other segments, they give high priority to attracting and retaining new cardholders. Loyalty points and discount coupons are offered to entice customers to increase their card usage. Market giants are also taking steps to capitalize on the growing mobile payment sector, which is expected to grow rapidly, according to Gartner.
Key market segments
The different types of credit cards include: general purpose, reward, private label, secured and specialty cards.
General purpose credit cards have revolving credit lines and are marketed to people above the age of 18 who meet the financial institution's minimum credit criteria. No deposits are needed for a general purpose credit card and the issuer establishes the credit limit. Within the U.S., the largest market for this kind of product, VISAs are the most popular general purpose cards, followed by American Express and MasterCard.
A rewards card offers an opportunity to earn different types of rewards based on usage. The different subtypes of reward cards include frequent flier miles cards, cash back cards, points cards, and premium credit cards. Banks are increasingly using loyalty programs as a tool for retaining customers. Loyalty reward cards are a $50bn+ industry in the U.S.A.
Private label credit cards are branded for a specific retail establishment, manufacturer or special interest. After experiencing a decline due to the economic recession from 2008 to 2010, this segment resumed growth. The total of private-label credit card loans in the U.S.A. is estimated to be over $100bn. Citi Retail Services, GE Capital Retail Bank, Capital One Financial Corp., Alliance Data Systems, TD Bank, Wells Fargo & Co. and JPMorgan Chase are the major issuers of private label credit cards.
Secured credit cards are backed by a savings account used as collateral on the credit available with the card, while specialty cards typically are offered through affiliations, partnerships, major brand retailers or service providers.
Regional market shares
The U.S is the largest market for credit cards, followed by Europe and then Asia.
In the U.S, credit cards generate revenues of over US$2.5 trillion, which is more than debit and prepaid cards. Top players in the industry include, JPMorgan Chase, Bank of America, Citigroup, U.S. Bancorp, American Express, Discover and Capital One.
Within Europe, the UK accounts for around 70% of all card holders. At £150bn a year, the UK credit card market has over 30 million customers. The market in the UK is fragmented, with Barclays (Visa) and Royal Bank of Scotland accounting for about 25% of the market.
Cash transactions dominate in Asian countries. Cards account for less than 20% of payments. Credit card usage in Asia Pacific is, however, expected to increase to more than Europe’s.
The Middle East and Africa region remains one of the smallest card markets globally. However, non-cash payment, especially through credit cards, is growing rapidly owing to the strengthening banking industry. Within this region Saudi Arabia and the United Arab Emirates are the largest and fastest-growing markets.
Co-branding, expansion into emerging markets, tighter competition and increased use of technology are key trends in the credit card industry.
Following a decline during the recession, banks are showing resumed interest in co-branding to allow them to partner with retailers, airlines and hotels to attract creditworthy customers.
The growing middle class and expanded consumer activity represent vast untapped potential in the emerging economies. Rising efforts from banks and increasing government support mean that the outlook is positive for credit cards in the markets of Latin America and Asia.
In an industry traditionally served by banks, new and innovative non-bank payment providers are entering the market and gaining ground. The leading players will have to deal with more competition.
Technological developments, changing customer expectations and global demographics, shifts in global trade flows and currency markets, and the growing impact of regulation will be the key factors influencing the credit card industry in future.
Leading Industry Associations
- The UK Cards Association
- North American Credit Card Association
- American Bankers Association
- Association of Credit Card Issuers Europe
- The Asia Pacific Smart Card Association
- The Bankers Association of the Republic of China
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